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Mauritius Country Report BTI 2010

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Mauritius Country Report BTI 2010 BTI 2010 | Mauritius Country Report Status Index 1-10 7.94 # 18 of 128 Democracy 1-10 8.45 # 17 of 128 Market Economy 1-10 7.43 # 22 of 128 Management Index 1-10 6.94 # 10 of 128 scale: 1 (lowest) to 10 (highest) score rank trend This report is part of the Transformation Index (BTI) 2010. The BTI is a global ranking of transition processes in which the state of democracy and market economic systems as well as the quality of political management in 128 transformation and developing countries are evaluated. The BTI is a joint project of the Bertelsmann Stiftung and the Center for Applied Policy Research (C•A•P) at Munich University. More on the BTI at http://www.bertelsmann-transformation-index.de/ Please cite as follows: Bertelsmann Stiftung, BTI 2010 — Mauritius Country Report. Gütersloh: Bertelsmann Stiftung, 2009. © 2009 Bertelsmann Stiftung, Gütersloh BTI 2010 | Mauritius 2 Key Indicators Population mn. 1.3 HDI 0.80 GDP p.c. $ 11296 Pop. growth % p.a. 0.6 HDI rank of 182 81 Gini Index - Life expectancy years 72 UN Education Index 0.84 Poverty2 % - Urban population % 42.4 Gender equality1 0.60 Aid per capita $ 59.2 Sources: UNDP, Human Development Report 2009 | The World Bank, World Development Indicators 2009. Footnotes: (1) Gender Empowerment Measure (GEM). (2) Percentage of population living on less than $2 a day. Executive Summary During the review period, this island state in the Indian Ocean continued to demonstrate political and economic vigor. Parliamentary elections in July 2005 resulted in a win for the Mauritius Labor Party, and its leader, Navinchandra Ramgoolam, became prime minister. Mauritius shows the second highest per capita income in sub-Saharan Africa, and outperformed all other African countries on the Human Development Index (HDI), in which it was ranked 74th worldwide in 2008. Mauritius is the only African country ranked in the HDI’s medium category of human development. Thus, the country had legitimate grounds on 12 March 2008 to celebrate the 40th anniversary of its independence, as one of the rare countries to have successfully combined modern Western democracy with globalization and a market economy. Viewed against the background of Africa’s political and economic fragility, Mauritius is an instructive exception. Despite its potentially conflict-prone ethnic and cultural heterogeneity, the island has maintained a stable parliamentary democracy, with regular elections, peaceful changes of government and a high level of rule of law based on a liberal constitution. For this reason, Mauritius has always been given the highest marks for political rights in international rankings. Yet, the mediocre ranking in Transparency International’s Corruption Perception Index must be seen as an indication of weaknesses in corporate governance, an issue that has also drawn criticism by the World Bank. In economic terms, Mauritius has been facing signs of crisis in its two key industrial sectors: textiles and sugar. Although a booming tourist industry allowed the country’s economic growth rate to stabilize at 5% in 2007 – 2008, this development has been accompanied by rising jobless rates in the Export Processing Zones. Unemployment has risen from a low of 4% to 5% in the late 1990s to around 8.6% in 2007 – 2008. Offshore finance, a third key area of economic activity, came under increasing pressure due to the worldwide financial crisis in 2008, as well as to a general tendency in OECD countries to bar use of tax havens. In addition, the offshore finance business faced strong pressure from India, where a crackdown on tax and finance fraud BTI 2010 | Mauritius 3 by that country’s domestic companies and individuals was underway, particularly after the Satyam affair, where executives of Indian high-tech firm Satyam Computer Services allegedly perpetrated massive fraud using company capital, using Mauritian off-shore banking facilities as a tax haven and transit point. The Labor government and the business sector have aggressively addressed structural problems that have been exacerbated by globalization. They have continued efforts to downsize and modernize the sugar cane industry, to induce the textile industry to specialize in high grade and competitive goods, to consolidate the country’s role as an offshore banking centre, and to promote an upgrade in skills and human capital which the country will need to master the process of structural change. Efforts to attract capital for new sectors such as seafood processing and pharmaceuticals show the government’s commitment to diversify in order to meet the demands of globalization. History and Characteristics of Transformation Before achieving independence in 1968, this former British colony was faced with social and economic structural problems typically associated with colonialism. The burdens left by colonial rule, (French (1715-1819), and then British) included a sugar cane monoculture that was vulnerable both to weather conditions and to demand and price fluctuations in European (at that time British) markets. Socially, sugar brought about the country’s “oligarchy” of plantation and sugar factory owners of European origin, who even today dominate the ownership ranks of industry, services and trade. This colonial economic legacy also left the island society with a high degree of ethnic and sociocultural heterogeneity. Some two-thirds of the island’s residents today are descended from contract workers recruited from British India. Other immigrants are of Malagasy or African descent, 3% are of British or French origin (Franco-Mauritian), and 3% are of Chinese extraction (Sino-Mauritian); collectively, these groups have brought with them a number of different languages and religions. In geographic and political terms, the island of Mauritius (including Rodrigues Island and the Chagos Archipelago), which forms part of Africa, is a member of the Southern Africa Development Community (SADC). Mauritius seeks to serve as a bridge from Asia to Africa, Europe and the United States: in the 1980s, companies from Taiwan, Hong Kong, and Singapore settled in the country’s economic processing zones (EPZs), and were joined in 2007 and 2008 by companies from mainland China. As a member of the group of the African, Caribbean and Pacific Group of States (ACP), Mauritius has had a preferential access to the European Union that has been progressively eroded in recent years, as well as to the African mainland via the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC). The colonial system left Mauritius with a Westminster model of parliamentary democracy and with a legacy of socioeconomic polarization between the Indian and Creole population majority BTI 2010 | Mauritius 4 and some privileged minorities (particularly the white “sugar barons” who assumed leadership positions). The emancipation of an educated class of Indo-Mauritians, whose members took over many leadership positions in the country’s post-independence political and administrative system, and in the judiciary and police apparatus, served to aggravate tensions between the Hindu majority and the Creoles and Muslims, who, due to a lack of education and career prospects, did not benefit from the later “economic miracle.” The ethnic segmentation of Mauritian society permeates all spheres of life – from kindergarten to school, from the club to the graveyard. This plays a major role in shaping political attitudes and behaviors. Contrary to the bleak outlook in 1960, when the country seemed hampered by overpopulation, limited space, a sugar cane monoculture, a lack of prospects for a rapidly growing young population, and tensions between ethnic groups, the island state has advanced into the small group of newly industrialized countries (NICs). It is Africa’s most successful emerging economy, an assertion supported not only by economic performance but also by UNDP data on human development. Prudent policies have supported structural transformation of the island’s economy. A competitive textile industry, a high-end tourism industry, modern information technology and banking services have provided growing prosperity and contributed to the stability of a functioning democracy, and – to a certain degree – welfare-state policies. However, the former sugar island’s political, economic and social success story is coming under pressure not only from globalization, but also from short-term fluctuations in factor prices and the effects of the world economic and credit crises. BTI 2010 | Mauritius 5 Transformation Status I. Democracy 1 | Stateness Despite the small size of the island republic, Mauritius legally, technically and Monopoly on the politically manifests its statehood to the full extent possible. However, it is not use of force feasible to exert its authority evenly over the full stretch of its vast maritime territory in the southeastern Indian Ocean. Mauritian citizenship is universal, and the notion of a Mauritian nation-state is State identity generally accepted. Refugees from Chagos, who were stranded on Mauritius and Rodrigues after their eviction from the islands in 1960, retain their right to return. Because they created a potential for protest, and gave substance to the government’s territorial claims, some of them were granted British citizenship. A substantial number who declared their wish to return home were partly acknowledged by British courts in 2007, but in 2008 were definitively denied homecoming rights by the highest British judicial authority (House of
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